Levi Strauss (LEVI) earnings Q3 2023

Levi Strauss on Thursday cut its full-year sales forecast, as it missed Wall Street’s quarterly revenue expectations and was dragged down by weaker shopping trends at department stores and big-box retailers across the U.S.

Shares fell slightly in extended trading.

The company’s more cautious outlook comes just three months after it already slashed its full-year profit outlook. It said it now expects net revenues to be flat to up 1% year-over-year compared with a prior range of between 1.5% to 2.5% growth. It said it anticipates adjusted earnings per share to be on the low-end of the previously shared range of $1.10 to $1.20.

In an interview with CNBC, CEO Chip Bergh said shoppers – pinched by inflation, rising mortgage rates and gas prices – have bought fewer items from retailers that carry Levi’s apparel.

“All the things that are impacting that middle-income consumer are impacting our wholesale business,” he said.

Here’s how the denim retailer did in its fiscal third quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG, formerly known as Refinitiv:

• Earnings per share: 28 cents, adjusted, vs. 27 cents expected
• Revenue: $1.51 billion vs. $1.54 billion expected

Net income for the three-month period that ended Aug. 27 was $10 million, or 2 cents per share, compared with $173 million, or 43 cents per share a year earlier. On an adjusted basis, earnings per share were 28 cents.

Sales were roughly in line from the $1.52 billion in revenue that the company reported in the year-ago period.

Chief Financial and Growth Officer Harmit Singh said on the earnings call that the company took a conservative approach with its outlook, despite seeing continued momentum in its direct-to-consumer business and improving trends in its wholesale business in the first part of the fiscal fourth quarter.

Like other retailers, Levi — which also includes Dockers and Beyond Yoga — has coped with a tougher sales backdrop in the U.S. Levi sells its items directly on its website and in its own stores across the globe, but also sells many items through chains retailers like Macy’s, Kohl’s and Target. Those retailers, which buy wholesale items from Levi to carry on their stores and websites, have seen weaker discretionary sales.

Bergh said its value-based denim lines, Signature by Levi Strauss and Denizen, have especially been softer. In the third quarter, he said sales of those brands, which are carried by Walmart and Target, were down double digits, he said.

“Clearly, that’s an indication that that value consumer is under pressure,” he said.

For Levi, direct sales and international sales have been the stronger parts of its business. Like Nike, Levi has tried to control its own destiny by driving more of its overall sales through its own stores and website.

In the fiscal third quarter, net revenues from Levi’s direct-to-consumer business increased 14%…